Tech Stocks Up After Tesla Earnings | Bloomberg: The Close 10/23/2024
HIS NEXT -- IS NEXT. ♪ >> THE COUNTDOWN IS ON. EVERYTHING YOU NEEDED TO GET THE EDGE AT THE END MARKET DAY. THIS IS "THE CLOSE." ROMAINE: THE S&P FINALLY BREAKS OUT OF THE TRADING RANGE. UNFORTUNATELY IT IS TO THE DOWNSIDE. LIVE FROM STUDIO 2, I'M ROMAINE BOSTICK. SCARLET:
I'M SCARLET FU. WE ARE KICKING OFF TO THE CLOSING BELL IN THE U.S. S&P 500 ON ITS THIRD DAY OF LOSSES. LEADING THE DECLINES AS THE MAGNIFICENT SEVEN, AS TESLA, THE ONLY MEMBER OF THE GROUP NOT UP ON THE YEAR, REPORTS EARNINGS AFTER THE CLOSE. THE 10-YEAR YIELD DID GET TO A SIZE 4.26%, AS WE CONTINUE TO
SEE REPRICING, WHICH IS SEEN AS LESS AGGRESSIVE AS BOTH -- THAN BEFORE. IT IS THE YEN IS THE BIGGEST ECONOMY AMONG G10 CURRENCIES, GETTING TO THE LEVEL WHERE PEOPLE ARE WONDERING WHETHER JAPANESE AUTHORITIES MAY INTERVENE. ROMAINE: SESSION THOSE IS SETTING UP FOR WHAT COULD BE ONE OF THE WORST DAYS IN A MONTH. HE IS ON DAYS LIKE TODAY WHERE IT IS GOOD TO MY FOLKS THAT THIS IS A MARKET OF STOCKS, RATHER THAN A STOCK MARKET. THERE ARE BRIGHT SPOTS TO BE FOUND IF YOU WILLING TO LOOK. THEY ARE TETHERED TO POSITIVE EARNINGS REPORTS THAT ARE BEING INCREASINGLY REWARDED MORE SIGNIFICANTLY THIS SEASON AS A WALL STREET STRATEGIST SAY THE SLEW OF UPSIDES EARNING -- EARNINGS REVISIONS WILL THEN SUPPORT TO BANKING ON THE RESUMPTION OF EQUITY RALLY AND RESUMPTION OF THE CYCLICAL ROTATION.
>> WHAT WE ARE ANTICIPATING IS BROADENING OF THE MARKET, RELATIVE PERFORMANCE OF THE TYPICAL STOCK VS. AN AGGREGATE INDEX. WE ARE FOCUSING ON A STRATEGY ON HOW TO PERFORM WELL. ROMAINE: THAT MAY PAYOFF LONG-TERM, BUT WE ARE NOT SEEING THAT TODAY OR YESTERDAY OR MONDAY.
WE MAY NOT EVEN SEE IT UNTIL ELECTION TUESDAY ON NOVEMBER 5. RIGHT NOW A LOT OF SHORT-TERM TRADERS AND LONG-TERM INVESTORS ARE RELUCTANT TO DO ANYTHING TO ROTATE, TO OSCILLATE CAN EVEN VACILLATE. NO BIG WAGERS FOR A WHILE AS POLITICAL RISK LOOMS AND THE ECONOMIC PICTURE REMAINS FAR TOO LAYERED TO BE CERTAIN OF ANYTHING. THAT IS A BIG REASON WHY THE TITRATING RANGE THE S&P HAD BEEN MIRED IN THE PAST MONTH HAS FINALLY BROKEN TO THE DOWNSIDE. THE S&P, WHICH YESTERDAY HAD ITS FIRST BACK-TO-BACK DAILY DECLINES IN SIX WEEKS, IS NOW POISED TO DO SOMETHING IT HASN'T DONE IN FIVE, CLOSE OUT THE DATE WITH THE MOVE OF 1% LOWER. SCARLET:
IT'S BEEN A RARITY. BIG TECH IS A BIG REASON THE S&P 500 IS DOWN SO MUCH TODAY. WE HAVE SEEN A RECENT SHIFT AWAY FROM TECH OF LATE. THAT IS SERVED AS A SAFE HAVEN IN A PLANNED GROWTH. IF YOU LOOK AT CYCLICALS, WHICH DON'T INCLUDE BIG TECH, COMPARED WITH DEFENSIVES, THAT IS THE WHITE LINE, IT IS MOVING UP IN 2024, EVEN AS NEW ORDERS, THE BLUE LINE, HAVE BEEN MOVING DOWN, WHICH IS A BREAK FROM THE HISTORICAL PATTERN. IF YOU ZOOM OUT A LITTLE BIT,
TO -- CYCLICAL STOCKS MOVE CLOSELY IN LINE WITH NEW ORDERS. MAYBE, ROMAINE, THIS IS THE STOCK MARKET SEEING OR EDGES SENDING SURVEY RESPONDENTS HAVEN'T YET EXPERIENCED. ROMAINE: THE PRICE ACTION DOESN'T LIE, AND YOU SEE WHERE THE INTEREST IS. THE QUESTION IS IS THE CONVECTION STILL THERE. AND EQUITY STRATEGIST AT MORGAN STANLEY JOINS US IN STUDIO 2.
>> THANK YOU FOR HAVING ME. ROMAINE: LET'S TALK ABOUT THAT ROTATION. EVEN THOUGH WE HAVE A SIGNIFICANT DOWN DAY WITH THE RUSSELL LAGGING, WE HAVE NOT SEEN PEOPLE ABANDON THAT CYCLICAL TRADE, OR THE IDEA THAT A CYCLICAL ROTATION WILL START OF BROADEN OUT AND WILL START TO ENCOMPASS MORE PARTICIPANTS.
>> WE HAVE FAITH IN OUR CYCLICAL CALL AFTER WE GOT STRONGER LABOR DATA. WE DECIDED TO ROTATE INTO CYCLICALS. ON THE DEFENSIVE SIDE YOU HAVE VALUATIONS THAT ARE QUITE STRETCHED FROM HERE. DEFENSIVE'S ARE STILL HEAVILY OWNED. WE THINK THE RISK REWARD SET UP IS NOT GREAT. YOU ARE ALSO SEEING EARNINGS REVISIONS START TO FALL WITHIN DEFENSIVES. ON THE CYCLICAL SIDE WE THINK
THE MARKET IS NO CONCERN AROUND THE HARD LANDING THE WAY WE WERE IN THE SUMMER WHEN DEFENSIVE WERE WORKING VERY WELL. WE ARE GOING BACK FOR THE SOFT LANDING CAMP. WE THINK THE CYCLICAL POCKET OF THE MARKET IS THE PLACE TO BE. ROMAINE:
THAT IS WHAT I'M CURIOUS ABOUT, HOW MUCH OF THAT IS TIED TO THE IDEA OF ECONOMIC CONDITIONS BEING STRONGER. STEVE SCHWARZMAN GAVE AN INTERVIEW WITH BLOOMBERG OVERNIGHT WHERE HE TALKED ABOUT THIS IDEA THAT IN HIS MIND A RECESSION IS OFF THE TABLE EVEN PENDING WHATEVER HAPPENS WITH THE ELECTION AND PUBLIC POLICY. YOU ARE IN THAT CAMP. MICHELLE: ABSOLUTELY, OUR ECONOMIES ARE IN THE SOFT LANDING CAMP. WE WILL GET ANOTHER 150 BASIS POINTS OF RATE CUTS, 25 INCREMENTS THROUGH JUNE. WE BELIEVE IN A SOFT LANDING. SCARLET: ROMAINE TALKED ABOUT HOW PEOPLE ARE RELUCTANT TO DO MUCH OF ANYTHING BECAUSE WE ARE GETTING EVER CLOSER TO THE ELECTION. HOW MUCH OF THIS SHIFT TOWARDS CYCLICAL THAT WE'VE SEEN PICK UP STEAM HAS TO DO WITH THE TRUMP TRADE? WE HAVE INDUSTRIALS AND FINANCIALS AS HER CYCLICALS. MICHELLE: ABSOLUTELY.
SOME OF IT HAS TO DO WITH THE TRUMP TRADE. IN 2016 NO ONE WAS EXPECTING A TRUMP WIN, THE MARKET WAS NOT POSITION FOR THAT IN ANY WAY. THE MARKET IS TRYING TO GET AHEAD OF THAT CONSIDERING A TRUMP WIN, THINKING IT IS MORE IN THE REALM OF POSSIBILITY. IS IT COMPLETELY PRICED IN THE MARKET? I DON'T THINK SO, BUT I DON'T THINK WE HAVE THE SAME HUGE DEGREE OF UPSIDE WE SAW IN 2016 AFTER THAT WIN. LIKE YOU ARE TALKING ABOUT, TODAY IS A PRETTY VOLATILE DAY, BUT WE ARE IN THE ZONE FOR ELECTION-RELATED VOLATILITY. SCARLET: AS PEOPLE TRY TO PRICE OUT WHAT TARIFFS MIGHT MEAN, IS THIS SOMETHING YOU CAN LOOK AT FROM A TOP-DOWN PERSPECTIVE -- THIS WILL BE BAD FOR CHIP COMPANIES, CONSUMER COMMITTEES, BUT GOOD FOR FINANCIAL COMPANIES? OR DO YOU GO FROM A BOTTOMS-UP APPROACH? MICHELLE: FROM THE TOP-DOWN APPROACH CONSUMER GOODS COMPANIES WILL BE SUBSTANTIALLY IMPACTED BY SIGNIFICANT INCREMENTAL TARIFFS ON CHINA.
CONSUMER GOODS COMPANIES, THE AVERAGE NAME WITHIN THE SPACE HAVE AROUND 20% EXPOSURE TO CHINA. THEY CONCEIVE SUBSTANTIAL EARNINGS DOWNSIDE IF WE COME OUT WITH A MUCH STRONGER CHINA TARIFF. ROMAINE: WHEN WE COME BACK TO THE U.S. AND THE HEALTH OF THE CONSUMER, A LOT OF IT HAS TO DO WITH THE PERCEPTIONS CONSUMERS HAVE. WE SPOKE TO GUESTS YESTERDAY, THE IDEA THAT HOLIDAY SPENDING IS EXPECTED TO BE WORSE THAN IT WAS LAST YEAR. PEOPLE ARE LOOKING FOR MORE BARGAINS WILL DESPITE THIS IDEA THAT THE COMPANIES THEMSELVES, THE RETAILERS THEMSELVES ARE MORE BULLISH ON THE ECONOMY, THAT IS NOT NECESSARILY TRANSLATED TO THE VIEW BY CONSUMERS. HOW DO YOU RECONCILE THAT?
MICHELLE: I THINK IT IS A VERY CHALLENGING ENVIRONMENT FOR THE AVERAGE CONSUMER. I THINK THERE IS A DISCONNECT BETWEEN THE WAY THE MEDIA OR PEOPLE SEE THE NEWS SPEAKING ABOUT INFLATION AND WHAT YOU FEEL WHEN YOU GO TO THE STORE. PEOPLE HEAR ON THE NEWS, OH GREAT, INFLATION IS COMING DOWN, BUT WHEN YOU GO TO BUY SOMETHING, THINGS ARE STILL A LOT MORE EXPENSIVE THAN THEY WERE A FEW YEARS AGO. THAT IS WEIGHING ON PEOPLE AND WEIGHING ON THEIR DECISIONS ON WHAT THEY ARE GOING TO BUY. WE HAVE SEEN CONSUMERS BECOME INCREASINGLY CHOICEFUL AND WHAT THEY ARE BUYING. WE HAVE SEEN TRAVEL HOLD UP REALLY WELL, LIVE EXPERIENCES, PEOPLE STILL VALUE THAT. BUT WITHIN THE GOODS SPACE
PEOPLE ARE BEING VERY DISCERNING AND NOT GOING OUT AND SPENDING INDISCRIMINATELY. ROMAINE: CIRCLE ALL THIS BACK TO THE IDEA OF STRUCTURING THE PORTFOLIO FROM WHATEVER ERA WE MIGHT BE HEADING INTO. GOING BEYOND ELECTION, GOING BEYOND 2025, ARE YOU IN A POSITION RIGHT NOW TO MAKE STRONG RECOMMENDATIONS FOR REALLOCATION RIGHT NOW, OR DO YOU STAND PAT WITH WHAT YOU HAVE? MICHELLE: LIKE I WAS TALKING ABOUT BEFORE CAN WE STILL REALLY LIKE CYCLICALS. WE ARE OVERWEIGHT IN FINANCIALS AS PART OF OUR CYCLICAL UPGRADE. WE HAVE SOME DEFENSIVE BALANCE WITH UTILITIES THAT ARE ALSO EXPOSED TO THE GENAI THEME, SO THAT GIVES US SOME BALANCE WITH ANOTHER POPULAR THEMATIC ELEMENT FOR THE ON THE UNDERWEIGHT SIDE WE ARE UNDERWEIGHT ON CONSUMER-ORIENTED SECTORS AND STAPLES AND OVER-QUALITY CONSUMER CYCLICALS. ROMAINE: GREAT CONVERSATION, GREAT START
TO THE SHOW. MICHELLE WEAVER OF MORGAN STANLEY KICKING US OFF TO THE CLOSE WITH BREAKING NEWS. SCARLET: WE HAVE SEEN IT IS SAID TO BE IN TALK TO ACQUIRE THE SOFTWARE GROUP ALL TEAR.-- ALTAIR UP ABOUT 4.5% IN INTRADAY TRADING. ROMAINE: A LOT MORE COMING UP ON THE SHOW. WE WILL TAKE A CLOSER LOOK AT STARBUCKS FROM INTERESTING KITCHEN SINK PRELIMINARY REPORT OUT OF THE COMPANY OVERNIGHT.
WE WILL FOLLOW THE STOCK REACTION AND MORE IMPORTANTLY FOLLOW THE GUIDANCE INTO 2025. SCARLET: CME REPORTING RESULTS THAT SHOW STRONG VOLUME, BUT WITH OCTOBER VOLUME TRAILING, WE DISCUSSED THE CURRENT QUARTER WITH THE CEO TERRY DUFFY. ROMAINE: DO YOU LIKE EARNINGS? YOU WILL GET A LOT AFTER THE BELL.
A DOZEN COMPANIES SCHEDULED REPORT INCLUDING NONE OTHER THAN TESLA. THIS IS "THE CLOSE" ON BLOOMBERG. ROMAINE: WELCOME BACK TO "THE CLOSE." HAPPENING RIGHT NOW, RIGHT HERE IN NEW YORK, JP MORGAN AND ROBINHOOD ARE HOSTING THE ANNUAL INVESTORS CONFERENCE WITH A LOT OF KEY SPEAKERS INCLUDING JP MORGAN CEO JAMIE DIMON, DAVID ROSEN, AND QUITE A FEW OTHERS PITCHING ACTIONABLE IDEAS IN THE INVESTING TECH BUSINESS AND POLICY SPACE. JOINING US FRESH OFF THE ROBINHOOD STAGE IS THE FOUNDER AND CHIEF INVESTMENT OFFICER OF THE HEDGE FUND OCEAN PARK INVESTMENTS. HE JOINED A LIGHTNING ROUND PANEL EARLIER AT THE CONFERENCE. A LITTLE LIGHTNING ROUND HERE, I THINK WE WILL TAKE IT EASIER ON YOU.
BUT WE WANT TO TALK ABOUT WHAT YOU PITCHED ON THE STAGE, ANYONE OCEAN PARK HAD A BIG FOCUS ON INDUSTRIAL STOCKS. WE STARTED TALKING ABOUT THE ROTATION THAT APPEARS TO BE UNDERFOOT, AND I WONDER IF THAT IS A ROTATION THAT IS GOING TO BENEFIT THE INDUSTRIAL STOCKS YOU ARE HAVING YOUR EYE ON. >> ONE THING PEOPLE DON'T REALLY UNDERSTAND IS THAT THE INDUSTRIAL AREAS, IT IS THE UNSUNG BACKBONE OF THE AMERICAN ECONOMY. I THINK THERE IS A SECULAR
CHANGE THAT IS GOING ON. IF YOU LOOK AT RIGHT NOW WE ARE SPENDING ABOUT -- STARTING TO SPEND 1.2 CHILI DOLLARS WITH THE INFRASTRUCTURE RIGHT NOW AND WE HAVE ANOTHER $52 BILLION THAT HAS BEEN ALLOCATED FOR SEMICONDUCTOR PLANS AND THINGS OF THAT SORT. NOT ONE NEW SEMICONDUCTOR PLANT HAS BEEN BUILT IN THE UNITED STATES.
YOU HAVE A $400 BILLION IN RENEWABLE ENERGY THROUGH THE INFLATION PROTECTION ACT. NOT ONE NEW PLANT HAS BEEN BUILT IN THAT AREA. IN THE U.S. TODAY WE HAVE DISH WE NEED ABOUT 7 MILLION NEW HOMES, AND IF YOU LOOK AT THE CONSTRUCTION GOING ON, IT'S GOING TO TAKE ANOTHER FIVE YEARS. THERE IS A SECULAR TAILWIND THAT A LOT OF PEOPLE DON'T FULLY UNDERSTAND AND REALIZE FOR THEM ROMAINE: I DON'T THINK MOST INVESTORS WOULD DISAGREE WITH THAT. IT FEELS DIFFERENT THIS TIME BECAUSE OF FEELING PEOPLE ARE MORE COMMITTED TO IT, AND WE HAVE SEEN THAT IN THE AI SPACE AND THE SEARCH FOR RENEWABLE ENERGY AND ENERGY SOURCES. WHAT GIVES YOU THE CONFIDENCE THAT WE WILL SEE MORE FOLLOW-THROUGH ON THAT THESIS THIS TIME AROUND? DENNIS: LET'S LOOK AT MUELLER INDUSTRIES. HERE YOU HAVE A COMPANY WHERE
IT IS AN $8 BILLION MARKET CAP COMPANY, FOLLOWED BY ONE ANALYST ON THE STREET -- ROMAINE: AND MUELLER MAKES? DENNIS: WIRE TUBINGS, REALLY KEY MATERIALS FOR INDUSTRIAL COMPANIES. IT IS EVERYWHERE. WHETHER IT IS IN THE HOMES, DEFENSE SPENDING, ENERGY, CONVERSION, ALL OF THESE THINGS THAT BASICALLY KEEP EVERYTHING TOGETHER, THEY MAKE ALL OF THOSE KINDS OF PRODUCTS. BRASS, COPPER, PLASTIC, ALL SORTS OF THINGS. THEY ARE THE UNDERPINNING, YET IT IS A BIG COMPANY. ONLY ONE ANALYST COVERS THIS COMPANY? THIS IS A PHENOMENAL COMPANY. THEY HAVE NET CASH ON THEIR
BALANCE SHEET. IF YOU LOOK AT THE REPLACEMENT VALUE OF BUSINESS, $52 A SHARE. I COULD GO ON ON THE FINANCIALS, BUT THE KEY IS THAT YOU FIND A LOT OF THESE INDUSTRIALS, BECAUSE PEOPLE BELIEVE THAT TECH IS WHERE EVERYTHING HAPPENS. BUT IF YOU LOOK AT INDUSTRIALS
LIKE MUELLER, UNITED RENTALS, IF YOU COMPARE THEM TO THANK STOCKS, THEY HAVE OUTPERFORMED THE FANG STOCKS THE LAST FIVE YEARS. I BELIEVE THE NEXT FIVE YEARS YOU WILL SEE THEM PERFORM EVEN MORE. SCARLET: YOU SEE THEM OUTPERFORMING THE FANG STOCKS AFTER OUTPERFORMING THE LAST FIVE YEARS. BUT WHEN YOU LOOK AT INDUSTRIAL COMPANIES, YOU HAVE LIMITED THEM TO A PRETTY SMALL GROUP WE ARE TALKING 10 TO 12 NAMES, AS OPPOSED TO 20 OR 30 OR 40. WHY LIMIT YOURSELF TO THIS SMALL COTERIE? DENNIS: THE GOOD THING ABOUT INDUSTRIALS IS YOU CAN TRY TO ANALYZE WHAT THE DOWNSIDE IS, WHAT BEN GRAHAM WOULD CALL MARGIN SAFETY. WITH HARD ASSETS AND CASH FLOWS, YOU GET A SENSE IN TERMS OF IF WE WERE TO LIQUIDATE THIS COMPANY AND JUST SELL THE LAND, WHAT IS IT WORTH? I MELT DOWN THE PLANT AND TURNED THE MIDDLE INTO GOLF CLUBS? HOW MUCH CAN I SELL THEM FOR? THAT IS A KEY POINT. FOR US, WE RUN A LOW NET
OPPORTUNISTIC STRATEGY. HE BASICALLY -- WE BASICALLY COME ALONG THE MARKETS ARE DISLOCATED. WHEN THE MARKETS ARE DISLOCATED IF WE ARE HAVING A GOOD DAY, MAY BE THE MARKETS ARE DISLOCATED TODAY, BUT WHEN THERE IS FEAR IN THE MARKETS -- WARREN BUFFETT SAY YOU WANT TO BE GREEDY WHEN THEY ARE FEARFUL AND FEARFUL WHEN THEY ARE GREEDY -- YOU WANT TO FIND THE NAMES WHERE YOU CAN HAVE SOME SORT OF DOWNSIDE, SO YOU CAN AT LEAST QUANTIFY HOW LOW CAN THIS STOCK REALLY GO. TO ANSWER QUESTION, WITH INDUSTRIALS YOU CAN AT LEAST GET A SENSE, CAN I QUANTIFY THE DOWNSIDE. I CANNOT DO THAT FOR SOFTWARE COMPANIES. SOFTWARE COMPANIES ONLY GO
WEIGHT UP AND I CANNOT DO THAT FOR BANKS, BIOTECH COMPANIES. I FIND SOLACE IN INDUSTRIAL COMMITTEES. SCARLET: I KNOW YOU ARE SUPER FOCUSED ON INDUSTRIALS, BUT ARE THERE ANY OTHER SECTORS THAT START TO APPEAR LIKE INDUSTRIALS OFFERING THE SAME FUNDAMENTAL VALUE AND THE FACT THAT THEY ARE UNLOVED AND LEFT BEHIND BY INVESTORS WHO ARE CHOOSING THE BIG GAINS OF BANK STOCKS? DENNIS: THAT'S A GREAT QUESTION.
WE FOCUS ON INDUSTRIAL-RELATED COMPANIES. THERE IS A LOT OF OTHER COMPANIES THAT PEOPLE WOULD NOT PUT IN THE INDUSTRIAL BUCKET, BUT WE CONSIDER THEM INDUSTRIALS. SEMICONDUCTOR COMPANIES. IF YOU ARE MAKING CHIPS, WE THINK THAT IS SEMICONDUCTOR.
CELL TOWERS. THERE ARE OTHER COMPANIES LIKE THAT -- AS LONG AS WE CAN IDENTIFY THE DOWNSIDE RISKS. THAT IS THE FIRST THING THAT WE FOCUS ON. WHAT IS THE DOWNSIDE? IF WE CANNOT QUANTIFY THE DOWNSIDE, IT IS NOT A BEGINNING CONVERSATION. SCARLET: BACK TO THE BASICS, THEN.
THANK YOU SO MUCH FOR JOINING US. FOUNDER AND CHIEF INVESTMENT OFFICER AT OCEAN PARK INVESTMENTS. QUICK NOTE THAT BLOOMBERG IS PARTNERING WITH THE ROBIN HOOD FOUNDATION TO LAUNCH A CHARITABLE STOCK-PICKING COMPETITION AIMED TO ENGAGE CLIENTS. THIS WILL START IN NOVEMBER AND RUN FOR SIX MONTHS. IF YOU ARE INTERESTED, FIND MORE INFORMATION AT ROBINHOOD.ORG. COMING UP ON "THE CLOSE,"
A ROCKY TIME FOR FAST-FOOD RESTAURANTS. INVESTOR CONCERNS ARE DRAGGING DOWN SHARES OF MCDONALD'S AND STARBUCKS. ROMAINE: LET'S GET A VIEW FROM THE SOUTH SIDE WITHOUT TOP CALLS, BIG MOVERS ON THE BACK OF ANALYST RECOMMENDATIONS. WE START OFF WITH CHEWY. REINSTATING COVERAGE OF THE ONLINE PET RETAILER WITH A HOLDER MEETING AFTER. LEE HAVING ABUY.
DOMINATING THE SPACE IS NOT AN EASY WALK IN THE PARK FOR CHEWY, WHEN YOU HAVE COMPETITION FROM THE LIKES OF AMAZON, WALMART, AND PETCO. WHILE CHEWY'S INVESTMENT IMPACT CARE IS INTRIGUING, HE BELIEVES IT IS TOO SMALL TO MATTER AT THE MOMENT. SNAP, UPGRADE OUTPERFORMING JMP, WITH ANALYSTS SAYING THAT THE SOCIAL-MEDIA COMPANIES REACHING AN INFLECTION POINT ON GROWING ENGAGEMENT IN THE U.S. AND NORTH AMERICA. ARTIFICIAL INTELLIGENCE ALSO ADDING TO THAT PERFORMANCE WILL SNAP EARNINGS OUT NEXT WEEK. SHOWS UP TODAY. THAT'S MOVE ON TO MCDONALD'S.
NOT A WHOLE LOTTA LOVE ABOUT THE SHARES TODAY. THEY ARE CUTTING THE FAST-FOOD GIANT'S RATING TO NEUTRAL AFTER AN E. COLI OUTBREAK THAT HAS LED TO AT LEAST ONE DEATH. DIFFICULT TO FIND NEAR-TERM UPSIDE. THOSE ARE SOME OF YOUR TOP CALLS. WE WANT TO STATE IN THE RESTAURANT SPACE AND TURNED TO STARBUCKS.
THEY REALLY SPILL THEM IN NUMBERS LAST NIGHT AND NOT NECESSARILY GOOD. STARBUCKS WITHDREW ITS FISCAL GUIDANCE FOR THE YEAR, AND THE NEWLY APPOINTED CEO BRIAN NICCOL IS CALLING FOR A TURNAROUND STRATEGY. JOINING US NOW, MANAGING DIRECTOR AT SEE FULL, WHO IS KEEPING THE BUY RATING ON THE SHARES NOW.
A NEW CEO COMES IN, HE TAKES A LOOK AROUND, HE THROWS OUT ALL THE GARBAGE, AND SAYS GIVE ME A FEW MONTHS, I WANT A PLAN FOR YOU. ARE YOU ON BOARD WITH WHAT YOU HAVE SEEN OR HEARD OUT OF HIM IN HIS SHORT TENURE? >> I AM. EXPECTED THE FOURTH-QUARTER SALES IN THE U.S. TO BE SOFT, SO I DON'T THINK IT WAS TOO SURPRISING. WE BELIEVE THAT THE COMMENTS THAT BRIAN MADE ON THE VIDEO THAT THE COMPANY POSTED ARE ZEROING IN ON ALL THE ISSUES. WE THINK THAT A BIG OPPORTUNITY IS TO SIMPLIFY THE MENU REMOVE SOME OF THE OFFBRAND ITEMS, AND FOCUS ON COFFEE AND ESPRESSO-BASED BEVERAGES FULL TO IT SOUNDS LIKE THAT IS WHAT HE IS LOOKING TO DO. ROMAINE:
I'M CURIOUS ABOUT THAT AND I HEARD HIM ARTICULATE THAT, AND I SAW AN INTERVIEW YOU DID WITH ANOTHER NEWS ORGANIZATION WORK HE TALKED ABOUT THE IDEA OF MAKING THE STARBUCKS STORES I GUESS MORE COMFORTABLE. THE IDEA THAT A LOT OF THESE STORES HAVE EFFECTIVELY SWITCHED TO BASICALLY JUST TAKE OUT OPERATIONS. I THINK HE WANTS TO BRING THE MAGIC THAT HOWARD SCHULTZ HAD IN THE 1990'S AND EARLY TO THOUSANDS WHERE YOU WENT TO STARBUCKS AND YOU STATED THERE. CHRIS: THAT'S RIGHT. BIG PART OF THAT IS IMPROVING THE WORK EXPERIENCE FOR THE EMPLOYEES. YOU HAVE MORE ENGAGED PARTNERS IF YOU COULD SIMPLIFY THE MENU, SIMPLIFY THE OPERATIONS. I THINK THAT IS GOING TO ALLOW
THEM TO BE MORE ENGAGING WITH THE CONSUMER AND THE GUESTS THAT COME IN. SCARLET: I LOOK AT STARBUCKS SHARES AND THEY PLUNGED IN AFTER-HOURS TRADE, AND THEY OPENED LOWER TODAY BUT THEY HAVE SINCE MOVED TO THE UPSIDE AND ARE UP .2%. REMAINED LIKE TO CALL THE PROJECT ROMAINE LIKED TO CALL THE PREANNOUNCEMENT A KITCHEN SINK ANNOUNCEMENT WHERE THEY ARE IN EVERYTHING. HAVE INVESTOR EXPECTATIONS BEEN RESET IF THE STOCK IS LITTLE CHANGED RIGHT NOW? CHRIS: SO I THINK INVESTORS' EXPECTATIONS HAVE BEEN RESET. I THINK THE MARGIN THA TTHEY REPORTED OR PRE-RELEASED YESTERDAY, THE IMPACT ON THE MARGIN WITH THE LOW EARNINGS, I THINK IS AN EXPECTATION THAT PEOPLE NOW HAVE THAT IS GOING TO BE MORE REASONABLE GOING FORWARD. I THINK ONE THING THAT MAY HAVE SURPRISED INVESTORS INITIALLY WAS THAT THERE WAS REALLY NO EARNINGS GUIDANCE OR INVESTMENT LEVELS THAT THEY PLAN FOR FOR 2025.
A LOT OF TIMES WE WERE HOPING THEY WOULD SET A GUARDRAIL FOR INVESTORS BECAUSE LEAVING IT UP TO INVESTORS' IMAGINATION CAN BE RISKY. SCARLET: YEAH, IT CAN BE DANGEROUS F I WANT TO SHIFT GEARS TO MCDONALD'S, BECAUSE THAT STOCK IS A SINKING AND HAS REMAINED LOWER FOLLOWING AN E. COLI OUTBREAK TIED TO QUARTER POUNDERS, SICKENING DOZENS OF PEOPLE IN THE U.S. CHIPOTLE -- THERE IS A LINK TO BRIAN NICCOL, BUT NOT SO MUCH -- IT HAD ITS OWN ISSUES WITH AN E. COLI OUTBREAK. WHAT CAN MCDONALD'S LEARN FROM WHAT HAPPENED IN TRIPOLI AND MAKE SURE HE DOESN'T -- WHAT HAPPENED IN CHIPOTLE AND MAKE SURE HE DOESN'T FOLLOW THE SAME PATH? CHRIS: I BELIEVE THE COMPANY HAS TAKEN THE CORRECT STEPS TO LIMIT THE IMPACTFUL I KNOW IT IS TOO EARLY TO GAUGE WHAT KIND OF SALES HIT THE COMPANY COULD HAVE, BUT THEY CLEARLY IDENTIFIED FOR LIKELY INGREDIENT, ONIONS, THAT CONTAINED THE BACTERIA, AND THEY REMOVED THEM FROM THE STORES WHERE THEY WERE SHIPPED.
THAT IS THE IMPORTANT THING, TO CONTAIN THE SITUATION AND MOVING FORWARD I DON'T THINK YOU WILL SEE MANY NEW CASES THAT ARE -- THAT START TODAY. I THINK YOU WILL SEE PEOPLE THAT ARE INFECTED AND THAT GET SICK, BUT I DON'T THINK YOU ARE GOING TO SEE ANY ADDITIONAL NEW CASES FROM PEOPLE EATING AT MCDONALD'S TODAY OR TOMORROW. SCARLET: GOT IT. CHRIS: YEAH, I THINK THE DIFFERENCE WITH CHIPOTLE WAS IT TOOK THEM SEVERAL MONTHS, EVEN QUARTERS, TO FIGURE OUT WHAT THE ISSUE WAS. SCARLET: RIGHT, AND THAT DIDN'T WORK OUT SO WELL. CHRIS, THANK YOU SO MUCH. I DON'T KNOW ABOUT YOU, BUT DOES THIS MAKE YOU THINK TWICE ABOUT GOING TO MCDONALD'S? YOU WILL GO TO MCDONALD'S. ROMAINE: I HAVE NOT GONE TO MCDONALD'S SINCE, I DON'T KNOW, THE NIXON ADMINISTRATION.
I TALKED TO THE ILLUSTRIOUS TOM KEENE AND YOU KNOW WHAT HE WAS DOING? SCARLET: GOING TO MCDONALD'S. OH, MY GOD. ROMAINE: I DON'T KNOW IF THAT IS FACT OR FICTION, YOU NEVER KNOW WITH TOM. [LAUGHTER] SCARLET: WE GOT A LOT MORE COMING UP ON "THE CLOSE."
CME REPORTING RESULTS THIS MORNING. IT SHOWED STRONG VOLUME THE THIRD QUARTER. YOU LOOK AT OCTOBER VOLUME, TRAILING BY 4%. LET'S DISCUSS THE CURRENT QUARTER WITH CEO TERRY DUFFY. THIS IS "THE CLOSE" ON BLOOMBERG. ♪ ROMAINE: JUST ABOUT 3:30 P.M. IN NEW YORK.
THIS IS "COUNTDOWN TO THE CLOSE ." I'M ROMAINE BOSTICK. SCARLET: I'M SCARLET FU. IT FEELS LIKE THINGS ARE HAPPENING IN TERMS OF PRICE ACTION IN THE EQUITY MARKET. ROMAINE: NOT NECESSARILY THE DIRECTION PEOPLE WOULD'VE WANTED IT TO BE. THIS WAS KIND OF COMING, THIS COILED SPRING. SOMETHING WAS GOING TO HAPPEN. THE HOPE WAS IT WOULD BE IN THE UPSIDE DIRECTION.
THIS IS KIND OF AN EFFECT OF THE ELECTION BEING RIGHT AROUND THE CORNER AND EVERYONE SAYING LET'S JUST HOLD OFF FOR A COUPLE WEEKS. SCARLET: THERE IS ANOTHER TWO WEEKS AGO BEFORE WE GET ANYTHING FURTHER, SO LET'S SEE HOW IT ALL SHAKES OUT. IN THE MEANTIME, EARNINGS COMING FAST AND FURIOUS. WE ARE SIFTING THROUGH ALL OF THEM, INCLUDING THOSE FROM CME GROUP, POSTING ITS BEST QUARTER TODAY. THE FUTURES AND OPTIONS EXCHANGE HAD STRONG GROWTH AND GROWTH IN RETAIL TRADING AS PART OF ITS NEW CLIENT ACQUISITION PROGRAM. JOINING US IS CHAIRMAN AND CEO OF CME GROUP, TERRY DUFFY. ALWAYS GOOD TO SPEAK WITH YOU. THANK YOU FOR JOINING US TODAY.
I LOOK AT THE AVERAGE DAILY TRADE VOLUME, 20% YEAR-OVER-YEAR WITH DOUBLE-DIGIT GAINS ACROSS EVERY ASSET CLASS. I'M CURIOUS HOW YOU READ THIS SURGE. ASIDE FROM INCREASED VOLATILITY IN AUGUST, GIVE US YOUR TAKE ON WHAT IT SIGNALS ABOUT THE DEGREE AND SCOPE OF UNCERTAINTY LIKE ROMAINE WAS TALKING ABOUT AROUND THE ELECTION OR MONETARY POLICY OR ANYTHING ELSE, FOR THAT MATTER.
TERRY CALDWELL, SCARLET -- TERRY: WELL, SCARLET, FIRST OF ALL, THANK YOU FOR HAVING ME TO YOU AND ROMAINE. YOU ARE RIGHT, IT GOES ACROSS OUR ASSET CLASSES, AND THIS IS THE SECOND CONSECUTIVE QUARTER THAT WE'VE SEEN GROWTH ACROSS ALL SIX ASSET CLASSES AND CME, NOT ONLY AVERAGE DAILY VOLUME, BUT OPEN INTEREST OR POSITIONS THAT OPEN ON THE BOOKS OF CME GROUP. THAT IS TRADITIONALLY NEVER WE SEE THAT. PEOPLE ARE MANAGING THEIR RISK, SCARLET. THEY HAVE NO CHOICE, THEY NEED TO MANAGE RISK.
IT'S A DANGEROUS PLACE OUT THERE. IF YOU DON'T, WE LOOK AT THE RECENT EVENTS WITH SOME OF THE BANKS THAT HAD ISSUES WITH DURATION RISK, WHETHER IT WAS A SIGNATURE BANK, SVB, OTHERS WHO WENT OUT OF BUSINESS BECAUSE THEY DID NOT HEDGE THEIR DURATION RISK. THAT JUST GOES TO SHOW YOU HOW QUICK THE MARKETS CAN MOVE, AND IF YOU ASSUME RISK ON YOUR OWN BALANCE SHEET IN THIS WORLD, IT'S A VERY DIFFICULT PROPOSITION. PEOPLE ARE USING OUR MARKETS ACROSS ALL MAJOR ASSET CLASSES FROM OUR AG PRODUCTS THROUGH OUR RATES BUSINESS AS YOU REFERENCED. IT IS A DYNAMIC TIME FOR US AT
CME GROUP. SCARLET: WHAT ABOUT THE FOURTH QUARTER SO FAR? VOLUMES AND ENERGY LIBERTY GOOD ACCORDING TO ANALYSTS, BUT THERE IS LESS ACTIVITY INEQUITIES. DO YOU EXPECT TO MAKE THAT UP ONCE WE GET CLARITY FROM THE ELECTION, OR WILL IT REQUIRE A SERIES OF EVENTS? TERRY: SCARLET, I THINK WHEN YOU LOOK AT THE FIRST COUPLE WEEKS OF OCTOBER THEY ARE A LITTLE SLOWER. WHEN YOU LOOK AT THE GEOPOLITICAL EVENTS THAT YOU REFERENCED AT THE TOP OF THIS INTERVIEW, THEY ARE NOT ON THE FRONT PAGE RIGHT NOW EVEN THOUGH THEY STILL EXIST, WHETHER IT IS RUSSIA-UKRAINE, THE MIDDLE EAST, CHINA-TAIWAN, YOU CAN GO ALONG THE LITANY AND LIST OF THINGS THAT ARE GOING ON IN THE WORLD. WE HAVEN'T HEARD A LOT ABOUT THEM, YET THEY ARE STILL THERE.
PEOPLE HAVE A TENDENCY TO SIT ON THEIR HANDS A LITTLE BIT AND IT'S A LITTLE BIT QUIET. SOME SAY IT IS THE QUIET BEFORE THE STORM, WE DON'T KNOW. WE DON'T KNOW WHAT THE FED IS GOING TO DO. THERE'S AN 85% PROBABILITY
THERE WILL BE A 25-BASIS-POINT MOVE IN NOVEMBER BUT THERE IS OTHERS THAT SUGGEST MAYBE THAT IS NOT THE CASE. ORIGINALLY IT WAS 100% PROBABILITY THEY WERE GOING TO MOVE. SO MUCH UNCERTAINTY THAT I THINK THERE IS A LITTLE BIT OF A WAIT-AND-SEE, AND YOU REFERENCED THE NOVEMBER 5 ELECTION DATE, AND THERE IS A LOT HINGING ON THAT BECAUSE THE POLICIES AND DIVERGENCE OF OPINIONS BETWEEN THE CANDIDATES COULDN'T BE GREATER. ROMAINE: LET'S STICK WITH THE WHOLE IDEA OF POLICY. TERRY, AS YOU KNOW, THERE HAS BEEN A LOT WRITTEN ABOUT THE AMBITIONS TO MAYBE TRY TO WRANGLE SOME OF THE DOMINANCE OUT OF CME. FMX LOOKING TO MAYBE POTENTIALLY DO CLEARING OVERSEAS IN LONDON.
YOU ARE STILL THE 800-POUND GORILLA, WHETHER IT IS FUTURES OR CASH, RIGHT NOW. DO YOU ANTICIPATE THAT IF THERE IS A CHANGE IN ADMINISTRATION, AND BY CHANGE, A REPUBLICAN-CONTROLLED WHITE HOUSE, THAT WE COULD SEE A MUCH DISH A LITTLE BIT MORE OF AN EMBRACE OF THIS IDEA OUT THERE TO MOVE SOME OF THE STUFF OVERSEAS? TERRY: WELL, FIRST OF ALL, I WOULD THINK THAT MR. LL UTNICK, COCHAIR OF THE TRANSITION COMMITTEE CAN WOULD HAVE TO BE CAREFUL ABOUT CONFLICT OF INTEREST. THERE WAS A STORY OUT
THERE TODAY ABOUT POTENTIAL CONFLICT OF INTEREST. THE PRESIDENT OF THE UNITED STATES, WHETHER IT IS VICE PRESIDENT HARRIS OR FORMER PRESIDENT TRUMP, I THINK THE LAST THING EITHER ONE OF THEM WOULD WANT TO DO IS TO EXPORT THE OVERSIGHT OF THE LARGEST DEBT MARKET IN THE WORLD, THE U.S. TREASURY DEBT. THERE IS 27 CHILE DOLLARS OF OUTSTANDING TREASURY DEBT TODAY --27 TRILLION DOLLARS OF OUTSTANDING TREASURY DEBT TODAY. THE FUTURES MARKET IS LARGER THAN THE CASH. 13% LARGER ON THE AVERAGE DAILY
VOLUME OF NOTIONAL VALUE FOR THE MARKETPLACE. WE HAD RECENT LEGISLATION COME OUT OF THE TREASURY DEPARTMENT FOR MANDATORY CLEARING OF CASH IN TREASURIES. AS YOU ARE AWARE, THAT GETS AMENDED IN 2025 AND 2026 FOR RESPECTIVELY. THAT JURISDICTION GOES UNDER
THE EXCLUSIVE JURISDICTION OF THE SEC. IF IN FACT THE UNITED STATES IS SO CONCERNED ABOUT THAT, HOW COULD THEY NOT BE CONCERNED ABOUT A MARKET THAT IS LARGER THAN THE ONE THEY MANDATE BE CLEARED AND OVERSEEN BY THE SEC? TO ME THERE IS A LOT OF ISSUES OUT THERE, AND IT IS ABOUT THE RESOLUTION AUTHORITY. IT IS NOT WHERE THE MONEY IS APT, IT IS NOT -- WHERE THE MONEY IS KEPT, BEING DULY REGULATED IN THE U.K. AND U.S. ROMAINE: I UNDERSTAND THAT, AND I UNDERSTAND YOU HAVE PROVEN YOUR CHOPS TO BE ABLE TO DO THIS AND DO IT EFFICIENTLY AND CONSISTENTLY YEAR AFTER YEAR AFTER YEAR. HAVE YOU HAD CONVERSATIONS AT ALL WITH THE SEC, WITH THE TREASURY, OR ANYONE IN THE CURRENT ADMINISTRATION ON THIS TOPIC? TERRY: RIGHT ACROSS THE BOARD I HAVE, ROMAINE. I'M NOT SHY ABOUT IT. I'VE BEEN TO THE TREASURY MULTIPLE TIMES. I TALKED TO SECRETARY ELLEN, I
TALKED TO THE UNDERSECRETARY'S, CFTC CHAIR, SENIOR MEMBERS ON THE HILL ON BOTH SIDES OF THE AISLE ABOUT THIS AND THE IMPORTANCE OF THIS PRODUCT, WHAT IT MEANS TO THE PARTICIPANTS THAT THE PEOPLE OF THE UNITED STATES OF AMERICA AND HOW WE HAVE TO MAKE SURE THAT WE OVERSEE OUR OWN SOVEREIGN DEBT. WE WOULD BE THE ONLY NATION ON THE PLANET THAT DOES NOT OVERSEE THE LAWS OF OUR OWN SOVEREIGN DEBT. SCARLET: TERRY, DID YOU GET A SENSE FROM THE CONVERSATIONS THAT THERE WILL BE OR THEY ARE LOOKING TO HAVE A RESOLUTION ON THIS BEFORE THE NEXT ADMINISTRATION TAKES OFFICE? TERRY: I'M NOT SURE THERE IS GOING TO BE A RESOLUTION OR NOT, SCARLET. I DO BELIEVE THERE IS A LOT OF INTEREST IN THIS RIGHT NOW. I'M NOT BASHFUL ABOUT SAYING THAT I'VE BEEN VERY VOCAL ABOUT THIS BECAUSE I TRULY BELIEVE IN IT. AND ONE OF THE THINGS I'VE SAID PUBLICLY, SCARLET, IS IF IN FACT THE LONDON CLEARINGHOUSE UNDER THE OWNERSHIP OF THE LONDON STOCK EXCHANGE WANTS TO REOPEN ITS U.S. ENTITY AND FOR THOSE PRODUCTS
IN HERE UNDER THE GUIDANCE AND OVERSIGHT OF THE U.S. GOVERNMENT, I DON'T HAVE A PROBLEM WITH COMPETING WITH ANYBODY THAT DOES THAT. BUT THAT'S NOT THE CASE HERE. THE RESOLUTION AUTHORITY WOULD GO TO THE BANK OF ENGLAND, NOT TO THE U.S. TREASURY DEPARTMENT, AND THEY
ARE THE ONES ISSUING DEBT. THIS IS SO DIFFERENT FROM ANYTHING AS WE ARE SEEING IN THIS COUNTRY. ROMAINE: I'M AFRAID WE'RE GOING TO HAVE TO LEAVE IT THERE. REALLY APPRECIATE YOU TAKING TIME FOR US.
TERRY DUFFY, CHAIRMAN AND CEO OF CME GROUP. BEFORE WE GO TO BREAK, WE WANT TO ACKNOWLEDGE THE LIFE OF A GIANT IN THE WORLD OF FINANCE WHO WE LEARNED PASSED AWAY YESTERDAY. HE WAS A SELF-DESCRIBED ANARCHIST AND DATA DOG AND WAS BEST KNOWN FOR CREATING THE FIRST-EVER EQUITY INDEX FUND WHILE WORKING AT WELLS FARGO IN 1971. HIS IMPACT ON THE INDUSTRY WAS
VAST. SOME OF THE RESEARCH HE DID BECAME THE BACKBONE OF VANGUARD'S FLAGSHIP S&P 500 FUND. THE WELLS FARGO DIVISION WOULD MORPH INTO THE ETF PIONEER ISHAR ES, NOW OWNED BY BLACKROCK. HIS DECADES OF WORK AT DIMENSIONAL FUND ADVISORS SPUN A TOOL THAT NOW FORM THES CORE OF MOODY'S ANALYTICS. JOHN "MAC" MCQUOWN LEAVES US THIS WEEK AT THE AGE OF 90. SCARLET: IT'S TIME FOR OUR STOCK OF THE HOUR. IT IS A TALE OF TWO AIRLINE
STORIES. SPIRIT AIRLINES AND FRONTIER TAKING OFF AFTER "THE WALL STREET JOURNAL" REPORTED THE PAIR HAVE REVIVED A TALKS. BOEING CONTINUES TO BE HHIT BY HEADWINDS. THE REAL FOCUS IS WHETHER STRIKING WORKERS WILL ACCEPT A CONTRACT OFFER AND PUT AN END TO THE MONTH-LONG STRIKE.
HERE TO DISCUSS ALL OF THIS IS ABIGAIL DOOLITTLE. LET'S START WITH THE SPIRIT AND FRONTIER. IS THIS TIED TO SPIRIT GETTING A BIT OF A REPRIEVE AN EXTENDED DEADLINE ON REFINANCING ITS 2025 BONDS? SCARLET: IT -- ABIGAIL: IT COULD BE. THIS IS NOT THE FIRST GO ROUND.
THESE TWO HAVE BEEN TALKING ABOUT A MERGER IN 2022, BUT JETBLUE WON OUT. SPIRIT'S STOCK WAS $32. IT IS BETWEEN TWO TO THREE DOLLARS FOR THE FRONTIER IS ESSENTIALLY GETTING A 90% SALE ON THE SHARES OF SPIRIT, THAT IS ONE WAY TO LOOK AT IT. EVEN THOUGH IT IS UP MORE THAN 100% THIS WEEK, THE BEST THREE DAYS FOR THE STOCK GOING BACK TO 2011. ROMAINE: IS THERE ANY INSIGHT AS TO
WHITE -- MAYBE NOT WHY THEY FEEL THEY NEED TO, BUT WHAT SCUTTLED THIS DEAL THE FIRST TIME AROUND, WHICH IS ISSUES OF COST AND REGULATORY CONCERNS. HAS SOMETHING CHANGED? ABIGAIL: WELL, FRONTIER WAS ULTIMATELY BEAT OUT BY JETBLUE. AND JETBLUE -- THAT WAS ANTITRUST ISSUES. IN THIS CASE IT IS LESS LIKELY THAT THAT WOULD BE THE CASE, BECAUSE THE SPIRIT HAS A LITTLE BIT MORE THAN 200 AIRBUS PLANES, FRONTIER HAS A LITTLE BIT MORE THAN 100. TOGETHER THEY'RE GOING TO BE, LET'S CALL IT 300 TO 400 PLANES.
ROMAINE: DON'T THEY SHARE A LOT OF THE SAME ROUTES? ABIGAIL: THEY SHARE A LOT OF THE SAME ROUTES. ROMAINE: THE ARGUMENT FROM JETBLUE -- ABIGAIL: THEY CAN DIVEST OF THOSE PLANES -- THIS IS WHAT BI TOLD ME, THEY CAN DIVEST THEM TO SAY ALLEGIANCE. OUR ANTITRUST LITIGATION ANALYST WITH B.I., I LOVE TALKING TO HER, I THINK
ANTITRUST IS SO INTERESTING -- SHE IS SAYING IN THIS CASE SPIRIT COULD ALSO SAY THEY ARE A FAILING COMPANY OR A FLAILING COMPANY, AND FOR THAT REASON ALONE THEY SHOULD BE ALLOWED TO GO FORWARD. SCARLET: MAYBE THERE WILL BE A CHANGE IN THE REGULATORY REGIME ANYWAY BY THE TIME THEY MOVE FORWARD. ABIGAIL: VERY GOOD POINT. SCARLET:
I WENT TO BRING UP A BOEING. THEY CAME OUT WITH RESULTS BUT THAT IS THE SECONDARY STORY. ABIGAIL: RESULTS DON'T EVEN MATTER. THE CEO VERY STRONG, SAYING
THAT HE IS PUTTING IN THIS LONG TURNAROUND, A FOUR PRONG TO PLAN, CASH BURN IS AN ISSUE. AT THE END OF THE DAY IT IS ALL ABOUT THE STRIKE, WILL IT END. OFFICIALLY IT WILL END -- THE VOTE WILL BE TAKEN 5:00 SEATTLE TIME, 8:00 HERE.
BUT WE ARE MORE LIKELY TO KNOW THE RESULTS AROUND MIDNIGHT. IT SEEMS AS THOUGH MANY WATCHERS AND EXPERTS EXPECT THE DEAL TO GO THROUGH AND THEY WILL GET THIS 35% RAISE, THE 401(K) MATCH. BUT WHO KNOWS? WE DON'T KNOW UNTIL THE VERY END. ROMAINE: YOU THINK THAT COULD BE A POTENTIAL CATALYST OF THE STOCK? THE IDEA THAT IS OFF THEIR PLATE? ABIGAIL: 100%, EXCELLENT POINT. THEY GET BACK TO THE BUSINESS OF TURNAROUND, AND HE IS SAYING THEY CANNOT FOCUS TOO MUCH ON NEW PLANES, THEY GOTTA TAKE CARE OF GET AN FINANCING, BUT AT THE SAME TIME HAVE THEIR EYE ON THE FUTURE. ROMAINE: ABIGAIL DOOLITTLE TAKING A CLOSER LOOK AT OUR STOCKS OF THE HOUR, BOEING AND SPIRIT AIR, AS WE CONTINUE TO COUNT YOU DOWN TO THE CLOSING BELL.
WE WILL GET BACK TO THE U.S. MARKET IN A MOMENT, BUT WE WANT TO GO OUT TO SÃO PAULO, BRAZIL, WHERE BLOOMBERG IS HOSTING ITS BLOOMBERG NEW ECONOMY PROGRAM. JOHN MICKLETHWAIT SITTING DOWN RIGHT NOW WITH MICROSOFT COFOUNDER LOCATES. LET'S TAKE A LISTEN -- MICROSOFT COFOUNDER BILL GATES. LET'S TAKE A LISTEN. BILL: A NUMBER OF COUNTRIES INCLUDING
THE UNITED STATES WITH THE PUBLIC ATTITUDES AND THE LEVEL OF INVESTMENT IN NUCLEAR FISSION ARE QUITE POSITIVE. AT THE CUP 28 -- COP28, A LOT OF COUNTRIES COME TOGETHER AND TALK ABOUT TRIPOLI NUCLEAR OF THE FUTURE. THAT IS DIFFERENT THAN GOING INTO DECLINE. THERE WAS A BIG CHALLENGE, THE THIRD-GENERATION PLANTS.
THEY HAVE A LOT OF PRESSURE, THEY ARE VERY EXPENSIVE, THEY ARE VERY COMPLEX. THERE IS THE QUESTION, CAN WE GET TO THIS FOURTH-GENERATION. YOU HAVE A NUMBER OF COMPANIES PRIMED TO USHER IN A MUCH SIMPLER DESIGNS, INCLUDING THE ONE I'M INVOLVED IN CALLED TERAPOWER.
THERE'S SEVERAL OTHER COMPANIES DOING THAT. THE FACT THAT THE TECH COMPANIES WANT TO BE CUSTOMERS FOR GREEN ENERGY AND AT LEAST FOUR A PERIOD OF TIME WANT TO PAY A BIT OF A PREMIUM AND THE BOND VECTORS GO UP IN THE PREMIUM GOES AWAY, THAT IS EXTREMELY HELPFUL TO REBOOT THE NUCLEAR INDUSTRY AROUND THESE FOURTH-GENERATION PLANTS. JOHN: THERE IS AN ISSUE, THOUGH, ISN'T THERE, THAT A LOT OF THE ATTENTION IS ON SMALL MODULAR REACTORS OR REVIVING OLD ONES RATHER THAN BUILDING BIG NEW ONES. IS THAT A PROBLEM? IT LOOKS IT FROM THE OUTSIDE, BUT I DON'T KNOW. BILL:
WELL, IF YOU GET SMALL, YOU CAN DO A LOT OF YOUR LABOR OFF-SITE, WHICH IS ADVANTAGEOUS FOR BUT IT ALSO MEANS YOUR EFFICIENCY IS A LOT LESS. FOR THE APPROACH TARA POWER IS USING, HAVING A MEDIUM-SIZED REACTOR, 345 MEGAWATT ELECTRIC. ROADMAP IF UTILITIES DO WANT BIG ONES, THOSE ARE SOMEWHAT MORE EFFICIENT, BUT FIRST WE WANT TO BUILD DOZENS OF OUR MEDIUM-SIZED REACTORS, AND WE HAVE BEEN ABLE TO MOVE SOME OF THE LABOR OFF-SITE, ALTHOUGH WE STILL HAVE SOME ON SITE.
BUT IT'S VERY TRICKY TO GET THE EFFICIENCY AS YOU GET SMALL, BECAUSE THE VOLUME OF THE REACTOR VALUE AND THE SURFACE AREA -- DIFFERENT PEOPLE ARE TAKING DIFFERENT APPROACHES, AND WE HAVE DIGITAL DESIGN SIMULATION THAT IS LETTING US BUILD FAR SIMPLER PLANTS THAN EVER BEFORE. JOHN: WHAT ABOUT FUSION? I KNOW IT IS A QUESTION I ASK YOU ONCE EVERY FIVE YEARS. DO YOU THINK -- IT ALWAYS SEEMS TO BE FIVE YEARS AWAY, OR AT LEAST THAT. IS IT NOW GETTING CLOSER? ONE OR TWO PEOPLE RECENTLY SAYING THERE IS POSSIBILITIES. BILL: YEAH, FOR BREAKTHROUGH ENERGY, WERE ALMOST ALL MY CLIMATE WORK IS, WE ARE THE LARGEST INVESTOR, WE FUNDED FOUR DIFFERENT FUSION COMPANIES FOR THE THE ONE THAT IS FURTHEST ALONG IS PRETTY FANTASTIC, COMMONWEALTH FUSION SYSTEMS, A SPINOFF ESSENTIALLY FROM M.I.T. THEY ARE HARD AT WORK BUILDING THE PROTOTYPE FACILITY OUTSIDE OF BOSTON.
YOU COULD SAY IT IS ABOUT SIX TO 10 YEARS BEHIND THE FOURTH-GENERATION FISSION, BUT IT HAS A LOT OF ADVANTAGES, AND OVER TIME IT COULD BE EVEN LESS EXPENSIVE. WE ARE BACKING THESE COMPANIES. THEY ARE EVEN USING VERY ADVANCED SOFTWARE TO SIMULATE HOW THEY WORK. IN THE LONG RUN, FISSION AND FUSION WILL BE A SUBSTANTIAL PART OF POWER GENERATION, COMPLEMENTING THE RENEWABLES THAT ARE BEING BUILT TO HIGH SPEED. JOHN: CAN I JUST CONTRAST -- YOU SORT OF ALLUDED TO IT A COUPLE TIMES -- ROMAINE: WE ARE LISTENING TO BILL GATES, THE COFOUNDER OF MICROSOFT, SPEAKING WITH OUR EDITOR IN CHIEF AT BLOOMBERG, JOHN MICKLETHWAIT, AT THE BLOOMBERG NEW ECONOMY FORUM. YOU CAN WATCH THIS UNDER BLOOMBERG TERMINAL. TYPE IN LIVE <GO> AND YOU CAN HEAR THE REST OF THE CONVERSATION AND THE REST OF THE CONVERSATIONS.
WE WANT TO BRING YOU BACK TO THE U.S. MARKET WITH 10 MINUTES UNTIL THOSE CLOSING BELLS. THE GOOD NEWS, SCARLET FU WE ARE WELL OFF THE LOWS OF THE DAY. THE BAD NEWS IS WE ARE SET FOR
ONE OF THE WORST SELLOFFS ROUTINE IN WEEKS. SCARLET: IN THE FIRST THREE-DATE LOSS IN A LONG TIME. BIG TECH, ALL SEVEN NAMES ARE LOWER, AND THIS IS BEFORE TESLA REPORTS EARNINGS, WHICH WE WILL GET YOU. STOCKS DOWN, BONDS DOWN, YIELDS ARE MOVING UP ONCE AGAIN. 4.25% ON THE 10-YEAR, RISING YIELDS HAVEN'T HEARD STOCKS ALL THAT MUCH UNTIL THIS POINT. MAYBE STARTING NOW IT IS
STARTING TO BRIGHT. -- BITE. ROMAINE: VIX TRADED ABOVE 20 ON THE DAY. DOLLAR ALSO ELEVATED. YOU PUT IT TOGETHER AND YOU GET A SENSE WITH ELECTION RISK OUT THERE OF WHY SOME FOLKS ARE WANTING TO SIT THIS ONE OUT FOR A FEW MORE DAYS. RICHARD WEISS JOINING US NOW
HERE IN NEW YORK CITY. CIO OF MULTI-ASSET STRATEGIES AT AMERICAN CENTURY INVESTMENTS, WHICH I'M TOLD IS NORMALLY OUT THERE ON THE WEST COAST. GREAT TO HAVE YOU HERE. >> GRADUALLY BACK IN MY HOMETOWN. ROMAINE: AND YOU BROUGHT RELATIVELY GOOD WEATHER TO NEW YORK THIS TIME OF YEAR, SO YOU'RE WELCOME. WE DO WHAT WE CAN TO
ACCOMMODATE OUR GUESTS. ACCOMMODATE US FOR A SECOND AND HELP US MAKE SENSE OF WHAT WE ARE SEEING IN THE MARKET THE LAST FEW WEEKS. WE WERE HITTING RECORD HIGHS. THERE IS NO SENSE THAT TODAY'S SELLOFF IS MORE THAN A MODEST BLIP. ARE INVESTORS CONVINCED -- DO THEY HAVE CONVICTION IN THAT RALLY THAT WE HAD A LEADING UP TO TODAY? >> I WOULD GUESS IT IS WANING AT THIS POINT, THE CONVICTION. SCARLET JUST MENTIONED THAT IT IS YIELDS POPPING UP.
THIS IS A CONCERN, THE FED LOWERS RATES, THE ECONOMY IS STILL RUNNING STRONG. YOU KNOW THE STORY. LONG RATES ARE MOVING UP. THAT IS NOT NECESSARILY A GOOD THING, A COMBINATION OF INFLATION, GROWTH SCARES, STRONGER THAN EXPECTED. AND ALSO POTENTIALLY CREDIT RISK FACTOR. THE U.S. DEFICITS AND DEBT ISSUES.
NOT GOOD NEWS. I CERTAINLY WOULDN'T TELL YOU I PREDICTED IT, BUT I DON'T THINK THIS IS A BIG SURPRISE THAT THERE IS SOME SELLOFF. I WOULDN'T BE SURPRISED IF A SELLOFF CONTINUES IN SOME FORM THROUGH THE REST OF THE YEAR.
ROMAINE: IT GETS TO THIS IDEA THAT IF YOU ARE LOOKING AT THE MARKET AND YOU THINK IT IS OVERVALUED AND YOU THINK THE RISKS COULD WEIGH ON VALUATIONS, IS THERE A CASE TO BE MADE FOR SOME OF THE STOCKS THAT I'VE GOTTEN LEFT BEHIND THIS WHOLE TIME, OR IS THAT QUICK TO MAKE IT WORSE FOR THOSE NAMES? RICHARD: I DON'T BELIEVE SO. I THINK THAT'S A GREAT POINT, ROMAINE. DIVERSIFICATION, REBALANCE -- IF YOU HAVE BEEN FORTUNATE ENOUGH TO RIDE THE S&P WAVE, MAYBE ONE IN 100-YEAR EVENT IN TERMS OF OUTPERFORMANCE, EMERGING MARKETS, LARGE VERSUS SMALL, ETC., ETC., I THINK DIVERSIFYING , REBALANCING BACK INTO SOME OF THESE IGNORED, ARGUED THE UNDERVALUED SECTORS, WHETHER IT IS SMALL CAP, SOME OF THE VALUE DEFENSIVE SECTORS, WE HAVE SEEN UTILITIES, SURPRISED TO SEE UTILITIES, FINANCIALS, REAL ESTATE, WHICH HAS BEEN IN THE DOLDRUMS FOREVER, NOW COMING BACK. I THINK THAT IS A SMART PLAY.
REBALANCE AND DIVERSIFY. TAKE YOUR PROFITS FROM THE S&P, EVEN MOVE INTO AN S&P EQUAL WEIGHTED PORTFOLIO. SCARLET: WHAT COUNTS AS A SAFE HAVEN OR DEFENSIVE NOW? BIG TECH BECAME GROWTH AND SAFE HAVEN. , UTILITIES YOUR CONVENTIONAL SAFE HAVEN, HAS BECOME GROWTH BECAUSE OF THE TIDE OF AI. RICHARD: CASH'S A STANDARDBEARER IN THAT REGARD AND YIELDING A DECENT RETURN. SCARLET: THAT IS THE $6.5 TRILLION IN MONEY MARKET FUNDS. RICHARD: GOLD, PRECIOUS METALS.
THEY ARE FRONT OF 30, 40% THIS YEAR. MAYBE NOT AS SAFE AS ONE MIGHT THINK, THE BLOOM IS OFF THE ROSE ON THAT ONE. I WOULD SAY CASH, BUT AS ODD AS IT MAY SEEM, I THINK GETTING OUTSIDE THE U.S. AND DIVERSIFYING IN SOME OF THE NON-US AREAS, BECAUSE OF THE POTENTIAL WEAKNESS OF THE DOLLAR GOING FORWARD AND WHAT IS GOING ON, LET'S FACE IT, WE HAVE TWO CANDIDATES WHO IN SWEET SCENARIOS ARE PROMISING EVERYTHING UNDER THE SUN IN TERMS OF SPENDING, FISCAL STIMULUS.
I'M NOT SURE EITHER IS GOING TO GET THEIR WAY, DEPENDING ON WHO WINS. IF THEY WERE TO GET ANY PART OF THAT, IT IS GOING TO BE INFLATIONARY. I DON'T KNOW HOW THEY ARE GOING TO BE ABLE TO FINANCE THAT.
NOT GOOD FOR THE DOLLAR IN THE LONGER TERM. SCARLET: NOT GOOD FOR THE DOLLAR AND THE LONGER-TERM, BUT IN THE MEANTIME IT'S DOING PRETTY WELL. LOOK AT HOW IT IS PERFORMING TODAY, FOR INSTANCE, IT IS HOLDING WITHIN A CERTAIN RANGE. WHAT WILL BE THE CATALYST FOR INVESTORS TO PAY ATTENTION TO THIS DEFICIT, DEBT BURDEN, LONG-TERM STRUCTURAL ISSUE? RICHARD: THAT IS THE $64,000 WESTERN. VALUE -- $64,000 QUESTION. VALUATIONS AND LONG-TERM TRENDS, THEY INFORM US WHICH WAY TO LEAN, BUT THE TIMING IS THE TRICKIEST PART PIT ALL I HAVE TO OFFER IS IT IS GOING HAPPEN ON A TUESDAY.
I HAVE NO IDEA WHAT THE EXACT CATALYST MAYBE. I THINK WATCHING THE CURRENCY MARKETS DESK TO YOUR POINT, THE REASON THE DOLLAR IS UP, WE HAVE HIGHER INTEREST RATES, STRONG GROWTH. ONCE IT BECOMES A CREDIT PROBLEM, MAYBE FITCH COMES OUT AND DOWNGRADES US AGAIN, I'M NOT REALLY SURE. ROMAINE: A LOT OF INVESTORS, AT LEAST THE ONES WEDDED TO THE U.S. MARKET, ARE BANKING ON THE IDEA
THAT WE WON'T BE AS BAD AS THE REST OF THE WORLD, AND SOMEHOW THAT WILL KEEP THE MONEY FLOWING FROM OUTSIDE THE U.S. INTO THE U.S. YOU BUY THAT ARGUMENT? RICHARD: NOT IN THE INTERMEDIATE OR LONGER-TERM. I DON'T PRETEND TO KNOW THE TIMING.
BUT MOMENTUM IS VERY FICKLE, TURNS ON A DIME. IT WILL REVERSE. IT IS INVESTMENT GRAVITY AT SOME POINT. THIS NOTION OF U.S. EXCEPTIONALISM -- I AM NOT TALKING ABOUT MORALLY OR SOCIALLY, I'M TALKING ABOUT THE STOCK MARKET -- SCARLET: FINANCIAL RETURNS. RICHARD:
JUST CAN'T, WON'T LAST. OVER PERFORMING OF THE U.S. IS 01 IN 100-YEAR EVENT. WON'T LAST, NEVER HAS FULL ROMAINE: AND I BELIEVE YOU. I WILL ASK YOU A QUESTION YOU
PROBABLY CAN'T ANSWER, BUT WHAT IS THAT UNWIND LOOK LIKE? IS IT A VIOLENT, VOLATILE CRASH, OR COULD WE HAVE SOMETHING AKIN TO A SOFT LANDING? RICHARD: RIGHT, A SLOW BLEED WHERE THE RETURNS MAY STILL BE POSITIVE, WHICH THEY CERTAINLY ARE, BUT THE OUTPERFORMANCE OF NON-US EQUITIES VERSUS DISH I THINK IT IS A RELATIVE ISSUE. SCARLET: LIKE JAPAN'S LOST DECADE KIND OF THING? RICHARD: THAT IS WHERE I WOULD CAGO, AS OPPOSED TO CALLING FOR A CRASH. ROMAINE: AND I SEEM YOU ARE NOT DOING ANY BETS AROUND THE ELECTION. RICHARD: WE NEVER DO. SCARLET: NOT HEDGING? RICHARD: WE DO NOT RECOMMEND -- WE CERTAINLY IN OUR OWN PORTFOLIOS DO NOT MAKE BETS ON INVESTMENTS ON ELECTIONS. IN HORSERACING TERMINOLOGY, IT IS A PARLAY BET, THE TRIFECTA. YOU HAVE TO KNOW WHO IS GOING TO WIN, THEY HAVE TO BE ABLE TO IMPLEMENT THE POLICIES THEY SAY THEY ARE, WHICH MAY OR MAY NOT HAPPEN, AND THEN THIRD, AND THIS IS THE HARDEST, THE MARKET CAN'T HAVE ALREADY DISCOUNTED IT, WHICH THEY ARE PRETTY EFFICIENT AT DOING THAT.
TO BE RIGHT ON ALL THREE OF THOSE, THAT IS THE TRIFECTA OF BETS. SCARLET: THAT HIS EXPERIENCE SPEAKING. ROMAINE: RICH, ALWAYS GOOD TO HAVE YOU AND IN THE STUDIO ONCE AGAIN F RICHARD WEISS IS CIO OF MULTI-ASSET STRATEGIES AND AMERICAN CENTURY INVESTMENT, COUNTING US DOWN TO CLOSING BELLS. THOSE BILLS THREE MINUTES AWAY, WITH THE S&P 500 DOWN ON THE DATE. NASDAQ DOWN 1.5. SCARLET: I'M SURPRISED THE RUSSELL 2000 IS HANGING AND IN THAT IT IS NOT FALLING MORE THAN THE NASDAQ. USUALLY A SELLOFF LIKE THAT,
YOU SEE A VIOLENT REACTION IN SMALL CAPS. ROMAINE: WE DID SEE BIDS IN THE REAL-ESTATE SPACE FOR THE SUM OF THAT HIGHER WEIGHTED. MAYBE THAT IS HELPING OUT A LITTLE BIT. SCARLET: YOU TALK ABOUT THE STRONGER DOLLAR, I'M SURPRISED AT HOW RESILIENT IT IS WHEN PEOPLE ARE CALLING FOR IT TO DECLINE. ROMAINE: NOT TRADING MY DOLLARS FOR EUROS. WE WILL SEE.
FULL MARKET COVERAGE OF ALL THE DAYS ACTIONS, THAT COVERAGE, IT STARTS RIGHT NOW. >> "THE CLOSING BELL," BLOOMBERG'S COMPREHENSIVE CLASS PLATFORM COVERAGE OF THE U.S. MARKET CLOSE, STARTS RIGHT NOW. ROMAINE: RIGHT NOW WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY.
ROMAINE BOSTICK ALONGSIDE SCARLET FU, TAKING YOU THROUGH THE CLOSING BELL, THE GLOBAL SIMULCAST. TIM STENOVEC JOINING US IN THE RADIO BOOTH, CAROL MASSAR HAS THE DAY OFF. KATIE "THE HORSE WHISPERER" GREIFELD FILLING IN TODAY. KATIE, YOU PICKED THE WRONG DAY TO BE HERE. KATIE:
I AM THRILLED TO BE HERE. WE HAVE A REALLY BUSY EARNINGS SCHEDULE. YOU'RE WAITING FOR TESLA, AND IT'S A BIG DOWN DAY IN THE MARKET COULD WE HAVE SO MUCH TO TALK ABOUT. TIM: IT'S NOT JUST TESLA! BUT WE HAVE T-MOBILE, WESTERN UNION, WHIRLPOOL, IBM, LAS VEGAS SANDS, AND MORE, SCARLET. SCARLET: IT REALLY FEELS LIKE HE ELECTION IS GETTING CLOSER, TOO, WITH SONY PEOPLE TRYING TO PUT ON TRUMP TRADES WERE TALKING ABOUT IT IN A WAY THEY WEREN'T TWO OR THREE WEEKS AGO. ROMAINE:
WE WERE TALKING ABOUT THE IDEA OF THE BACK-TO-BACK DECLINES IN THE S&P, THE FIRST TIME THAT HAPPENED IN SIX WEEKS WILL NOW WE ARE SETTING UP FOR A TRIFECTA OF THE CLIENT. DEPENDENT -- TRIFECTA OF DECLINES. DEPENDING ON HOW THINGS SHAKE OUT THE NEXT 45 SECONDS CAN THE S&P COULD DROP 4%, WHICH IT HASN'T DONE IN FIVE WEEKS OR SO. TIM: WHAT DOES THAT MEAN IF IT DOES HAPPEN? ROMAINE: I DON'T KNOW. YOU TELL ME. TIM: THIS RELENTLESS RALLY LAST SIX WEEKS. 20% ON THE S&P 500. ROMAINE: YOU GIVE BACK 1%.
YOU'RE RIGHT, AT THE END OF THE DAY THIS IS A BLIP. I GUESS THE CONCERN IS DOES THIS TURN INTO SOMETHING MORE. IS IT PEOPLE MOVING TO THE SIDELINES CLOSE TO THE ELECTION AND NOT WANTING TO BE EXPOSED? SCARLET: OR IS IT A SHIFT OF MOMENTUM? THOSE ARE THINGS YOU ONLY REALIZED AFTER THE FACT FOR SOME . ROMAINE: WE JUST WANT TO REITERATE, THIS IS NOT PANIC ON THE STREET.
WE HAD STOCKS THAT MOVED HIGHER ON THE DAY. BUT THE AGGREGATE EFFECT WAS RED ACROSS THE SCREEN. THE S&P IS GOING TO AVOID THE 1% DROP.
IT HASN'T HAD A 1% MOVE UP OR DOWN SINCE SEPTEMBER 19. IS GOING TO FINISH THE DAY DOWN TODAY BY .9%, .92%. TIM STENOVEC, I KNOW YOU ARE PRECISE. IN THAT CASE WE ROUNDED DOWN TO .9. DOW JONES INDUSTRIAL AVERAGE
DOWN .96%. WE WILL ROUND OUT UP, 1% DROP. TIM: ROUNDING WITH ROMAINE, I WANT TO LOOK AT THE S&P 500. 182 STOCKS MOVE HIGHER TODAY. 618 STOCKS MOVED LOWER. SCARLET: NOT A LOT OF NEED TO ROUND OFF THE NUMBERS WHEN YOU LOOK AT SECTOR PERFORMANCES.
WORST DECLINERS ARE DOWN BY 1.4%. BEST PERFORMERS, REITS AND UTILITIES, RATE HIKE AND SENSITIVE SECTORS. TIM: LET'S LOOK AT THE COMPANIES THAT MOVE HIGHER. I WANT TO START WITH SPIRIT AIRLINES.
THEY JUMPED, REACHING THE HIGHEST INTRADAY LEVEL GOING BACK TO AUGUST. "WALL STREET JOURNAL" REPORTS THAT FRONTIER HOLDINGS IS RENEWING A BID FOR SPIRIT AIR. IT WOULD POTENTIALLY CHALLENGE LARGER RIVALS. SHARES HIGHER BY 45% TODAY. AT&T TICKER T, THEY MOVE HIGHER AFTER THE COMPANY GAINED TWO MORE MOBILE SUBSCRIBERS THAN ANALYSTS EXPECTED F SHARES WERE 4.7%. THE COMPANY AND IT 403,000 MONTHLY SUBSCRIBERS.
AND FINALLY, TEXAS INSTRUMENTS SHARES ROSE AFTER THE CHIPMAKER REPORTED THIRD-QUARTER RESULTS THAT BEAT EXPECTATIONS. UP 4% TODAY. THEY GAVE THE DISAPPOINTING FORECAST, BUT THIRD-QUARTER RESULTS OVERSHADOWED THOSE. TEMPORA REBOUND, ONE HASN'T -- TIME FOR REBOUND, ONE HASN'T BEEN SEEN YET. KATIE: LET'S GET TO DECLINERS.
I NEED TO CHOOSE FROM. ROMAINE: I'M GOING TO INTERRUPT YOU FOR A SECOND SINCE TIM WAS GOING ON AND ON AT&T. WHY NOT TALK ABOUT T-MOBILE? THEY CAME OUT WITH EARNINGS JUST CROSSING THE WIRE. THIRD-QUARTER NUMBERS ON AN ADJUSTED BASIS, 8.20 4 BILLION IN TERMS OF EBITDA. A METRIC THAT A LOT OF FOLKS PAY ATTENTION TO, ALSO A BEAT ON THE STREET. TOTAL REVENUE 20.16.
THOSE ARE YOUR THREE NUMBERS AND THEY BEAT FOR GUIDANCE FOR THE FULL YEAR. THE COMPANY SAYING THEY ANTICIPATE THE FULL-YOUR CORE ADJUSTED EBITDA, 31.6, $31.8 BILLION, RIGHT AROUND WHAT THE STREET WAS LOOKING FOR. KATIE: YOU CAN SEE THE SHARES MOVING HIGHER TO THE SECOND FOR TRADERS TO DECIDE WHAT THEY WANTED TO DO WITH THE GUIDANCE RAISE. THE BAR WAS HIGH FOR THIS COMPANY FOR THE T-MOBILE SHARES UP 40% YEAR-TO-DATE THROUGH TODAY'S CLOSE. MOVING HIGHER, SCAR. SCARLET:
IT'S INTERESTING, WITH VERIZON REPORTING THAT. MISSED US PEOPLE WERE NOT NECESSARILY UPGRADING PHONES. T-MOBILE ENCOURAGES A LOT OF EXCITEMENT OF WHERE IT STANDS. TIM: THE T-MOBILE CEO SAID IT DELIVERED ANOTHER QUARTER OF INDUSTRY-LEADING RESULTS, RECORD-LOW THIRD-QUARTER CHURN. ROMAINE: TESLA EARNINGS NOW CROSSING THE WIRE, THIRD-QUARTER ADJUSTED EPS, $.72 A SHARE. THE STREET WAS LOOKING FOR 60.
RELATIVELY IN-LINE WITH ESTIMATES. THE STREET ON AVERAGE WAS LOOKING FOR 25.43. GROSS MARGINS THAT 19.8% AND WELL ABOVE THREE ESTIMATES. CASH FLOW IN THE MOST RECENT QUARTER COMING IN WELL ABOVE THE STREET ESTIMATES, 2.70 4 BILLION. KATIE:
BIG BEAT, ESPECIALLY WHEN IT COMES TO ADJUSTED EPS. $.72. THE ESTIMATE BEEN $.60 IN THE THIRD QUARTER. TESLA EXPECTS SLIGHT GROWTH IN VEHICLE DELIVERIES IN 2024. YOU CAN SEE THAT REFLECTED IN THE SHARES MOVING HIGHER. IT'S BEEN A REALLY ROUGH RIDE FOR TESLA THIS YEAR, BUT SHARES CRILLY HIGHER 5%. SCARLET: THE NUMBER EVERYONE IS PAYING ATTENTION TO HIS GROSS MARGIN. 19.8% FOR THE QUARTER.
ANALYSTS WERE LOOKING FOR SOMETHING UNDER 17. YOU NEED TO LOOK AT THE AUTOMOTIVE GROSS MARGIN. WHAT ANALYSTS ARE LOOKING FOR SOMETHING IN THE NEIGHBORHOOD OF 14.9%. TESLA EXPECTS GROWTH IN VEHICLE
DELIVERIES AND 2024. THIS IS ENCOURAGING FOR THOSE LOOKING FOR TESLA TO RECOVER. TIM: I'M TRYING TO MAKE IT THROUGH THE THIRD-QUARTER UPDATE DECK HERE. THE COMPANY, DESPITE SUSTAINED MACROECONOMIC HEADWINDS AND OTHERS PULLING BACK ON EV INVESTMENTS, TESLA REMAINS FOCUSED ON EXPANDING HIS VEHICLE AND ENERGY PRODUCTION LINE UP REDUCING COSTS AND MAKING CRITICAL INVESTMENTS IN AI PROJECTS. THEY SAY "WE BELIEVE THESE EFFORTS WILL ALLOW US TO CAPITALIZE ON THE TRANSPORTATION AND ENERGY SECTORS." SCARLET: I WILL TAKE US AWAY FROM TESLA FOR A MOMENT AND LOOK AT THE SEMICONDUCTOR SPACE.
FIRST-QUARTER REVENUE WAS $1.7 BILLION. ADJUSTED EPS OF $.86 TOPPING THE AVERAGE ANALYST ESTIMATES BY A NICKEL. THE STOCK MOVING UP IN AFTER-HOURS TRADING AS WE AWAIT ANY KIND OF OUTLOOK. ROMAINE: MATTEL CROSSING THE WIRE. BIG BEAT ON THIRD-QUARTER ADJUSTED EPS.
TOP LINE SALES ONE POINT $84 BILLION, TOUCH BELOW WHAT THE STREET WAS LOOKING FOR. GROSS MARGINS COMING IN ABOVE ESTIMATES. THE COMPANY SAYS IT SEES FULL-YEAR ADJUSTED EPS IN THE RANGE OF $1.35 TO $1.45. THE STREET LOOKING FOR $1.44 HERE. THE COMPANY SAYS IT IS FINDING A WAY TO CUT COSTS TO BOOST PROFIT GOING FORWARD. KATIE: I ALSO WANT TO BRING US LAS
VEGAS SANDS. JUST A FLURRY OF EARNINGS. YOU LOOK AT ADJUSTED EPS COMING IN LIGHT IN THE THIRD QUARTER, $.44. THE ESTIMATE HAD BEEN $.53. WHEN IT COMES TO NET REVENUE FOR LAS VEGAS SANDS, $2.86 BILLION. LIGHT VERSUS ESTIMATES OF $2.79 BILLION. SHARES OFF 3%. LAS VEGAS SANDS MISSING ON SEVERAL ESTIMATES THERE. TIM:TIM:
I'M LOOKING AT WHIRLPOOL, SHARES UNCHANGED AFTER HOURS FOR THE THE COMPANY SOLD SEES FISCAL-YOUR FREE CASH FOR OF $5 MILLION. FISCAL YEAR REVENUE OF $16.9 BILLION, ABOVE ESTIMATES OF 16.7 GOING DOLLARS -- $16.7 BILLION. EARNINGS-PER-SHARE ABOVE ESTIMATES OF $3.43. SHARES UNCHANGED IN THE AFTER
HOURS. SCARLET: VIKING THERAPEUTICS AS WELL, THIRD-QUARTER REVENUE WAS ZERO DOLLARS COMPARED WITH ZERO DOLLARS THE SAME TIME LAST YEAR. WE NEED TO LOOK INTO THAT A LITTLE BIT FURTHER. THIS IS A COMPANY THAT LOST MONEY. ANALYSTS WERE LOOKING AT A LOSS OF $.25. IT WAS NARROWER THAN
ANTICIPATED. $50 MILLION IN THE QUARTER, UP 35% FROM A YEAR EARLIER. SCARLET: LET'S LOOK AT WESTERN UNION -- ROMAINE: LET'S LOOK AT WESTERN UNION. SHARES NOT DOING A LOT. $1.1 BILLION.
EPS IN LINE, $.46 A SHARE ON AN ADJUSTED BASIS F IT IS STANDING BY THE FULL-YEAR FORECAST IT HAD PREVIOUSLY GIVEN. KATIE: LET'S LOOK AT RAYMOND JAMES, JUST AN EMBARRASSMENT OF RICHES. FOURTH-QUARTER ADJUSTED EPS BEAT ESTIMATES. ADJUSTED EPS FOR THE FOURTH QUARTER COMING IN AT $2.95, BIG BEAT VS. GUESSTIMATE OF $2.43.
NET REVENUE FOR THE QUARTER AT $ 3.46 BILLION. ESTIMATES OF $3.1 BILLION. SHE IS NOT MOVING TOO MUCH. FOURTH-QUARTER ADJUSTED EPS DOES RANKING ADJUSTMENTS. TIM: SHARES OF IBM DOWN 3.3%. ESTIMATES FOR OVER $15 BILLION. THIRD-QUARTER OPERATING EPS
CAME IN ABOVE ESTIMATES OF $2.30. CASH FLOW SHIVE ESTIMATES.-- SHY OF ESTIMATES. LOTS OF EARNINGS. WE'RE LOOKING AT WHAT IS GOING ON WITH TESLA. SHARES SURGING IN AFTER-HOURS,
HIGHER AFTER THE COMPANY SAID IT EXPECTS SLIGHT GROWTH IN VEHICLE DELIVERIES AND 2024. WE ARE GOING TO CONTINUE OUR COVERAGE ON RADIO, TV, YOUTUBE, SAME PLACE, SAME TIME TOMORROW. THIS IS BLOOMBERG.
♪ ROMAINE: LET'S KEEP THE COVERAGE GOING ON BLOOMBERG TELEVISION. A LOT OF STOCK MOVING IN THE AFTER-HOURS TRADE. LAS VEGAS SANDS, SOME OF THE BIGGEST RECLINERS. THE BIGGEST MOVER TO THE UPSIDE IN THE AFTER-HOURS TRADE BELONGS TO TESLA. BEATING ON THE TOP AND BOTTOM LINE, PROVIDING GUIDANCE THAT ALSO SEEMS RELATIVELY BULLISH, EVEN GETTING AN UPDATE ON THE CYBER TRUCK, SAYING THEY DID ACHIEVE GROSS MARGIN POSITIVE ON THE TRUCK AND NOW THEY PLAN TO SEQUENTIALLY INCREASE PRODUCTION ON THAT VEHICLE. SETH GOLDSTEIN, EQUITY STRATEGIST AND CHAIR OF THE ELECTRIC VEHICLE COMMITTEE AT MORNINGSTAR, JOINS US TO TALK A LITTLE BIT MORE ABOUT WHAT IS GOING ON. THERE WAS TALK ABOUT EV'S
FALLING OUT OF FAVOR, NOT JUST TESLA, BUT OVERALL. WE HEARD FROM JOHN MCNEIL YESTERDAY ON THIS VERY PROGRAM WHO WORKED FOR TESLA, LYFT, SAYING THAT EV'S ARE STILL BEING APPRAISED BY CUSTOMERS, AND AT LEAST BASED ON THE RESULTS WE SAW OUT OF TESLA, THAT SEEMS TO BE THE CASE. >> THAT IS EXACTLY RIGHT. WE SAW TESLA RETURN TO GROWTH
WITH DELIVERIES, AND WE SEE TESLA IS RAMPING UP ITS NEW VEHICLES. THE CYBER TRUCK IS GOING TO BE RAMPING UP PRODUCTION, AND TESLA IS ON TRACK TO DELIVER THE NEW, MORE AFFORDABLE VEHICLE IN THE EARLY PART OF NEXT YEAR, AND WE GOT A POSITIVE ANNOUNCEMENT FROM GM YESTERDAY SAYING THAT THEY ARE STILL BULLISH ON EV'S AND THAT THEY -- THEY THINK THEY CAN MAKE THEM PROFITABLE. I THINK WHAT WE SAW IS A TEMPORARY SLOWDOWN IN EV GROWTH, BUT GENERALLY EV'S ARE STILL GROWING AND CONSUMER DEMAND IS STILL THERE. ROMAINE: THE COMPANY TESLA SAYING IT IS
ON TRACK TO OPEN THE MEGA FACTORY IN SHANGHAI. TO YOUR POINT, SETH, ON THE EV SIDE, A MORE AFFORDABLE EV, THEY ARE SAYING THEY PLAN TO LAUNCH AFFORDABLE MODELS IN THE FIRST HALF OF 2025. I WANT TO GET YOUR THOUGHTS ON THIS, BECAUSE THIS HAS BEEN A BIG BUGABOO AND A BIG REASON INVESTORS STARTED TO SOUR ON THE EV TRADE, A LOT OF THESE VEHICLES WERE OUT OF REACH FOR A LOT OF FOLKS. GREAT IF YOU HAD $100,000 TO SPEND, BUT IF YOU DIDN'T, YOU HAD GO HYBRID OR EVEN GAS. IS THAT GOING TO CHANGE IN A MEANINGFUL WAY NEXT YEAR? SETH: I BELIEVE SO. WITH TESLA, GM, FORD, AND HYUNDAI LAUNCHING MORE AFFORDABLE VEHICLE MODELS THAT WILL COME IN BELOW THE AVERAGE SELLING PRICE OF NEW AUTOS IN THE U.S., I THINK WE ARE GOING
TO SEE MORE CONSUMER DEMAND TO WHERE YOU HAVE INTEREST RATES ALSO COMING DOWN SO THE MONTHLY PAYMENTS TO CONSUMERS IS MORE IN REGION FOR THE MAJORITY OF CONSUMERS IN THE AFFORDABLE VEHICLE MARKET. EV'S HAVE BEEN A LUXURY VEHICLE, BUT AS WE SEE MORE NEW MODELS AT A LOWER PRICE POINT COMBINED WITH LOWER INTEREST RATES, WE ARE GOING TO SEE MORE OF THE AFFORDABLE VEHICLE DEMAND AND THINGS LIKE THE FULL-SIZED -- THINK OF THE TOYOTA CAMRY OR SOMETHING LIKE THE SUV, MIDSIZED SUV, ALL OF A SUDDEN WE ARE GOING TO SEE EV'S IN THESE MARKETS WHERE WE HAVE NOT REALLY SEEN THOSE BEFORE AT AN ADEQUATE RANGE OR WITH THE TECHNOLOGY THAT CONSUMERS DEMAND. SCARLET: ANOTHER REASON WHY THE STOCK IS MOVING HIGHER IN AFTER-HOURS TRADING IS PROFITABILITY METRICS. THE GROSS MARGIN WHEN YOU BACK OUT THE REGULATORY CREDIT CAME IN AT 17.1%.
ANALYSTS WERE LOOKING AT SOMETHING IN THE NEIGHBORHOOD OF 14.9%. HOW SUSTAINABLE IS THIS? SETH: I THINK IT IS VERY SUSTAINABLE. WE HAD TESLA HAD MULTIPLE HEADWINDS THAT LED TO THE TEMPORARY DECLINE GROSS MARGINS FOR THE FIRST HALF OF THE YEAR. THEY WERE RAMPING UP THE CYBER TRUCK FULL OF IT WAS NOT PROFITABLE FROM A GROSS MARGINS STANDPOINT.
LIKELY TURNING PROFITABLE IN THE COMING QUARTERS. WE HAD HIGHER RAW MATERIALS COST IN THE RAW MATERIALS COSTS HAVE BEEN DECLINING AND NOW WE HAVE DECLINING DELIVERIES, MEANING HIGHER FIXED COST PER CAR. AS TESLA WAS LOWERING THE COST AND STOP SLASHING PRICES LIKE THEY DID LAST YEAR, WE ARE SEEING GROSS MARGIN START TO REBOUND, AND IT MAKES A LOT OF SENSE THAT THIS IS GOING TO BE THE TREND FOR TESLA GOING FORWARD, MEANING THAT THE FIRST HALF WAS THE BOTTOM. SCARLET: I MENTIONED THE GROSS MARGIN, EX-REGULATORY CREDIT.
TESLA TROLLED THE OTHER CARMAKERS FOR BEING BEHIND ON MEETING EMISSIONS REQUIREMENTS. TESLA NOTCHED ITS SECOND HIGHEST QUARTER REVENUE. HAVE INVESTORS UNDERESTIMATED THAT AS A SOURCE OF REVENUE STRENGTH FOR TESLA? SETH: IT CERTAINLY HELPS, AND IT HELPS DRIVE POSITIVE FREE CASH FLOW, AND IT ALLOWS TESLA TO MAINTAIN A VERY STRONG BALANCE SHEET WITH A STRONG NET CASH POSITION. I DO THINK THAT TESLA WILL LIKELY STILL SEE REGULATORY CREDIT REVENUE FOR THE NEXT SEVERAL YEARS AT LEAST AS OTHER AUTOMAKERS STILL HAVE TO BUY CREDITS TO MEET THEIR STANDARDS. ROMAINE: I AM CURIOUS GOING FORWARD WHEN WE TALK ABOUT THE BROADENING OUT OF THE EV SPACE BEYOND JUST TESLAS. FOR A WHILE THAT WAS THE ONLY VIABLE EV YOU COULD BUY. THAT CHANGED IN A BIG WAY THE
LAST COUPLE YEARS. WE HAVE SEEN RETICENCE BY LEGACY AUTOMAKERS ABOUT HOW MUCH THEY WANT TO KEEP INVESTING IN THIS AND HOW FAST THEY WANT TO GO. ARE YOU CONFIDENT IN THE COMMITMENT THAT GM, FORD, AND TO A SMALLER EXTENT SOME OF THE JAPANESE AND KOREAN AUTOMAKERS MIGHT HAVE IN REALLY PUSHING DEEPER INTO THE ELECTRIC VEHICLE SPACE? SETH: I THINK SO. I JUST THINK IT IS NOT GOING TO BE AS INSTANT AS WE ARE SEEING IN, SAY, CHINESE AUTOMAKERS THAT HAVE BEEN PIVOTING VERY QUICKLY AND GOING ALL IN ON ELECTRIC VEHICLES. I THINK YOU'RE COMPANIES LIKE FORD AND GM ARE TAKING A STEP BACK AND WANTING TO MAKE SURE THESE VEHICLES CAN BE PROFITABLE AND THAT THEY ARE NOT GOING TO END UP HAVING TO TAKE OUT A LOT OF DEBT BECAUSE THEY ARE SELLING UNPROFITABLE VEHICLES WHEN THEY WANT TO MAKE SURE THAT THE CONSUMER DEMAND IS THERE, MEANING THEY NEED TO HIT THE LOWER PRICE POINT. JUST SERVING THE LUXURY
VEHICLE, WE SEE EV'S BECOME SOMEWHAT SATURATED, SO I THINK FORD AND GM ARE SMARTLY LOOKING AT THIS AND SAYING WE ARE GOING TO SERVE THE MARKET, BUT ONLY WHEN THE COSTS MAKE THESE VEHICLES PROFITABLE FOR US TO DO SO. I THINK THAT WILL HAPPEN IN THE NEXT COUPLE OF YEARS. SCARLET: I'M LOOKING AT THE SHARE PRICE RIGHT NOW, AND EVEN WITH THIS BIG BOOST, IT IS STILL NOT BACK TO THE LEVELS IT WAS BEFORE ROBOTAXI DAY ON OCTOBER 10 WHEN TESLA DIDN'T QUITE DELIVER ON THE DETAILS. SETH, WHAT WILL YOU BE LISTENING FOR THE CONFERENCE CALL TODAY? IT WON'T BE MORE DETAIL ON ROBOTAXI, BECAUSE THEY WOULD'VE TOLD IS ALREADY ON OCTOBER 10. SETH: YES, YES, EXACTLY. I WILL BE LOOKING FOR MORE DETAIL ON THE FULL SELF-DRIVING, BECAUSE TO GET TO ROBOTAXIS, WE NEED TO START WHERE WE ARE TODAY. AT ROBOTAXI TESLA DID SAY THAT FOR TEXAS AND CALIFORNIA THEY PLAN TO LAUNCH THE UNSUPERVISED SOFTWARE NEXT YEAR.
I WANT TO HEAR MORE ABO
2024-10-25 01:15
